This is the second in a series of three articles. This first looked at the different sources of energy we use to power our grids. This one breaks down where emissions come from across our economy, and the final article will suggest ways we might be able to contribute to bringing emissions down. 

We’re getting better at understanding where greenhouse gas (GHG) emissions come from, which means we have a pretty good idea which activities contribute the most, and where we can take actions to reduce emissions.

We know that using electricity from the grid in our homes and businesses contributes the most to emissions, both in Australia and globally¹. The next biggest contributor to emissions is what’s called stationary energy – gas used in peoples’ houses and onsite generators in industries like mining. Transport including emissions from cars, trucks, domestic shipping and aviation is the next biggest contributor to emissions, followed by agriculture, fugitive emissions from fossil fuel mining and drilling, then industrial emissions like steel and concrete, and finally waste and land use.

When we say emissions, we are talking mostly about carbon dioxide (CO2). These are the greenhouse gas emissions created by burning fossil fuels like coal and gas and account for close to 70% of the emissions in Australia in any given year, with methane and nitrous oxide accounting for most of the remaining 30%.² Methane is associated with the land and waste sectors, while nitrous oxide comes mostly from fertilizers.

How are we tracking?

You may be aware 195 countries have signed up to the Paris Agreement, which aims to limit warming to between 1.5 and well below 2 degrees. As part of this agreement the countries set their own net zero commitments and interim targets. Australia has made some progress towards net zero emissions, but there’s still some way to go.³ 

The Federal Government has set a renewables target of 82% by 2030. The Clean Energy Authority’s latest Annual Progress Report estimates we’re at around 32% of electricity powered by renewable energy.⁴  

It may feel like getting from 32% to 82% renewable energy in just over 5 years is a bit of a stretch, but renewable energy generation is catching up – renewable energy as an input into the energy supply mix on electricity grids more than doubled in the seven years to 2015, and it continues to progress with every quarter. The latest quarter figures show we are pushing up towards over 40% energy generation from renewables.⁵ 

Transport and industry

So where are the biggest emissions reductions likely to come from in the next five years and beyond – in addition to the decarbonisation of the grid? 

This is the question governments around the world are asking themselves. In fact, the Australian government will be coming out with sector plans this year for how each part of the economy can decarbonise in order to meet our commitments.   

When we say sectors, we’re grouping the activities we segmented in the pie chart above.  

Transport is among the top contributors to emissions in Australia overall.

It may feel like getting from 32% to 82% renewable energy in just over 5 years is a bit of a stretch, but renewable energy generation is catching up – renewable energy as an input into the energy supply mix on electricity grids more than doubled in the seven years to 2015, and it continues to progress with every quarter

Another large contributor to emissions is what’s called industrial processes and product use, which includes emissions from the production of chemicals, metals and minerals, including in cement and steel manufacture.  

While these areas might feel like they’re difficult for many of us to have much influence over, they’re a big focus of our stewardship efforts at Australian Ethical.

Future-focused portfolios

We have made addressing climate change a priority because we see it as a systematic threat to the continuing good health of people, planet and animals.  

This means we are allocating capital and using our influence with companies and governments to accelerate the transition to net zero emissions. We do this not only because it creates better outcomes for the planet and its inhabitants, but because we see it as an urgent priority and critical to the financial best interests of those that invest with us.  

Our investments in battery innovation and solar farms via our Infrastructure Debt Fund is one example of the way we are allocating capital to our new energy future and generating investment returns for our members and investors.  

Because our ethical screening process considers climate performance, we also tend to invest more in climate solutions – our listed portfolios have 77% lower CO2 intensity compared to the mainstream fund comparisons⁶, and we have 4.6 times the investment in renewables and energy solutions.⁷